Foxconn: Failure & Fraud

There are two national publications with recent updates on the Foxconn project, and each report highlights fundamental problems with the billions in public subsidies for that foreign corporation. Here’s a roundup of the latest on this dodgy corporate welfare:

Bruce Murphy (writing online for national tech site The Verge) reports Wisconsin’s $4.1 Billion Foxconn Boondoggle (“Gov. Scott Walker promised billions to get a Foxconn factory, but now he’s running away from it”):

When Walker signed the Foxconn deal in November 2017, the details matched those jotted on the napkin [literally, the original deal was written on a napkin]: the state promised a $3 billion state subsidy if the company invested $10 billion in a plant that created 13,000 jobs.

The size of Wisconsin’s subsidy quickly began to grow, as spelled out in state legislation passed about six weeks later and implemented by the Walker administration. By December 2017, the public cost had grown to include $764 million in new tax incentives from local governments in Racine County, which is just 40 minutes south of Milwaukee where the plant was to be located. Other additions included $164 million for road and highway connections built to service the plant, plus $140 million for a new electric transmission line to Foxconn that would be paid for by all 5 million ratepayers of the public utility We Energies. With other small costs added, the total Foxconn subsidy hit $4.1 billion — a stunning $1,774 per household in Wisconsin.

Back when the subsidy was $3 billion, Wisconsin’s non-partisan Legislative Fiscal Bureau estimated that it would take until 2043 for taxpayers to recoup the subsidy. This long payback period was due to Walker and Republicans effectively cutting the state’s corporate income tax for manufacturers to zero in 2011. This meant the subsidies to Foxconn would not be a tax write-off, but billions in cash that would be paid back by state income taxes paid by Foxconn workers. At $4.1 billion, the payback date for the state was likely 2050 or later.

Some doubt the subsidy will ever actually be recouped. “Realistically, the payback period for a $100,000 per job deal is not 20 years, not 42 years, but somewhere between hundreds of years and never,” wrote Jeffrey Dorfman, an economics professor at the University of Georgia, in a story for Forbes. “At $230,000 [or more] per job, there is no hope of recapturing the state funds spent.” And this was before the subsidy had risen to $4.1 billion, or about $315,000 per job.

Murphy’s exhaustive article is highly recommended – he reports on the sketchiness of the jobs estimates from Foxconn and state officials, the bait & switch toward a lower-tech product, obvious environmental problems with by-product toxic gases, and the use of eminent domain to take Wisconsin residents’ homes for a Taiwanese project.

Of course none of this should really be surprising, especially given that Foxonn has made similar, magically-shrinking promises of similar ilk in countries like Vietnam, India, and Brazil. And this is all before you seriously consider the environmental impactof the arrangement, which many aren’t. At this point, the fading promises have become almost comedic in nature (if you ignore taxpayers footing the bill for the kerfuffle). Vast plans to build a major panel manufacturer plant with thousands of new jobs have been replaced by hype, buzzwords, and nonsense:

“Even the Gen 6 panels might not be manufactured in Racine for long. “We are not really interested in television,” Woo told the newspaper, though he said the company wants to build America’s first thin-film transistor (TFT) fabrication, which can be used in LCD products. Rather, Woo said, workers at the Wisconsin plant will be focused on figuring out new ways to use Foxconn’s display, cellular, and AI technology, building out an “ecosystem” Woo calls “AI 8K+5G.”

We’ve already noted that 5G is important but violently over-hyped, and this idea of an “AI 8K+5G ecosystem” is largely meaningless (they really should have thrown a blockchain reference in for good measure). A May 2018 poll of locals found that 66% doubted the deal would ever actually meaningfully benefit the local economy, and the plan isn’t having anywhere near the impact on polling that Walker had hoped ahead of the midterms. At this rate, Wisconsin will be lucky to see a few thousand jobs in exchange for an investment most objective observers doubt will ever actually pay for itself.

(Readers may recall that I criticized a state official’s presentation before the local business league and a local newspaper’s reporting on that presentation as, fundamentally, hyped-up nonsense. SeeA Sham News Story on Foxconn. Each and every person who sat in that presentation without laughing – or better yet without tossing a tomato – was complicit in buffoonery. Even merely reaching for a tomato would have been an encouraging sign.)